Nicolas Sarkozy was elected President of France in May 2007 by a convincing majority. This support was echoed in the legislative elections in June 2007. Although Sarkozy is from the UMP, the same Party as out-going President Chirac, his mandate promises rapid and radical change. While the government’s objectives are job and wealth creation, the key drivers are:
Encouraging home ownership
Maintaining high consumer spending
Assisting SMEs
Increasing French corporate competitiveness through R&D and innovation
Supporting targeted sectors (digital, life sciences, aerospace, design…….)
Sustainable development (energy sources, anti-pollution measures….)
The Sarkozy government has already outlined initiatives which it hopes to implement immediately or by Jan 2008. These include:
Freeing-up French labour law by allowing over-time to be tax-exempt, thereby effectively by-passing the 35-hour week regulations
Introducing new fiscal and financing measures to assist small and medium-sized enterprises (SMEs)
Tax credits and other incentives to encourage R&D and innovation-led businesses
The de facto abolition of wealth tax as thresholds can be offset by, amongst other, investments in SMEs
Introducing home mortgage equity loans
Making primary residences exempt of inheritance tax
Economy
The French economy continues to lag its European neighbours in 2007, with GDP running just above 2% per annum. Accelerating the GDP growth rate is a key objective of the new government at the expense of reducing government deficits in the short term, with the exception of the health/social security deficit.
2006
2007
2008
GDP Growth
1.7
2.1
3
Consumer spending
2.1
2.3
2.8
Housing spending
2.2
2.2
2.9
Corporate spending
2.4
-
-
Unemployment rate
9.7
9.1
8.6
Inflation rate
1.9
1.8
2
Household saving ratio
15.2
15
14.5
By early 2008, the French economy should begin to feel the positive effects of the measures introduced in mid2007 by the new government. We believe GDP will grow by nearer 3%, boosted by continuing strong consumer spending and buoyant housing market. Consumer spending will continue to be focused on specific sectors, notably home appliances, DIY, electronics, leisure, travel and services. The introduction of home equity loans will have a sustained impact on housing demand as well as home-associated activities like renovation, gardening and DIY.
Inflation shows little sign of picking up despite higher oil prices. Nevertheless, the $:€ rate should be monitored for possible knock-on inflation. The best macro-economic news in France is that unemployment has convincingly broken through the 10% barrier. The unemployment rate at end June 2007 of 8.7% was the lowest in 25 years.
Address: IBT Partners - 17 rue du Colisée - 75008 Paris - France
Nicolas Sarkozy was elected President of France in May 2007 by a convincing majority. This support was echoed in the legislative elections in June 2007. Although Sarkozy is from the UMP, the same Party as out-going President Chirac, his mandate promises rapid and radical change. While the government’s objectives are job and wealth creation, the key drivers are: